Australian Dollar, AUD/USD, US Dollar, ASX 200, RBA, Federal Reserve – Talking Points
- The Australian Dollar nudged lower despite the economic glow being intact for now
- Global interest rates are heading north, undermining growth and risk linked assets
- RBA actions did little to boost AUD. Will US Dollar moves dominate AUD/USD?
The Australian Dollar dipped after 2Q quarter-on-quarter GDP came in as forecast at0.9% and against the previous 0.8%, that has been revised down to 0.7%.
Annual GDP to the end of Julywas 3.6% instead of 3.4% anticipated and 3.3% prior. It reveals upward revisions to previous quarters in 3Q and 4Q 2021.
Australia’s ASX 200 stockindex firmed slightly on the news after opening lower. The recent weakness has evolved following on from last month’s US Federal Reserve Bank Jackson Hole symposium.
In prepared remarks, Fed Chair Jerome Powell laid out the case for much higher interest rates than the market had previously been expecting. Treasury yields have gone much higher as a result, helping the US Dollar to a 24-year high against the Japanese Yen.
The Fed’s hawkish rhetoric has raised fears of a severe growth slowdown and global equity indices are reflecting the deteriorating outlook, including the ASX 200.
Today’s GDP figures come after theReserve Bank of Australia’s 50-basis point increase in their cash rate target yesterday, the fifth hike since lift-off in May. That too was unable to lift the Aussie in a lasting way.
A continuing contraction in monetary conditions may further undermine growth-linked assets like the Aussie and the ASX 200. Bank Bill futures markets are pricing in at least 25 basis points in tightening at the next RBA meeting in October.
The latest Australian trade data for Augustwill be released tomorrow and according to a Bloomberg survey, the market is forecasting an AUD 14.65 billion trade surplus for the month. This is on the back of the prior month’s record-breaking AUD 17.67 billion.
Iron ore exports continue to contribute significantly to the nation’s bottom line. All Australian miners are producing at less than US$ 20 per tonne. It is currently trading around US$ 100 a tonne on the Singapore Exchange (SGX) and the Dalian Commodity Exchange (DCE).
The overall reaction of AUD/USD appears to be more related to US Dollar strength rather than AUD weakness. The Aussie is weaker to a lesser extent against most other G-10 currencies today.
AUD/USD SHORT TERM CHART
--- Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter
